SMART MOVES - Tips for all the single buyers

7/15/2014

SMART MOVES - Tips for all the single buyers

By ELLEN JAMES MARTIN

Last year, when the National Association of Realtors surveyed homebuyers throughout America, it found that single buyers had been especially hard-hit by the restrictive mortgage standards that began during the economic downturn.

According to the survey, the market share of single buyers declined from 32 percent in 2010 to 25 percent in 2013, and stringent lending standards were a major factor in the decline.

But Art Godi, a former president of the NAR, says restrictive lending practices are gradually easing and that real estate agents are finding better ways to help their clients to obtain the financing needed to fulfill their home-buying plans.

With both home prices and rental rates rising in many areas, Godi says an increasing number of homebuyers - including numerous singles - are eager to leave their rental units and buy a first home as soon as possible.

Are you a single person who'd like to buy a home, but worry you'll be turned down because of less-than-stellar credit? If so, Godi recommends you seek mortgage pre-approval through a face-to-face meeting at the office of a local lender, such as a community bank or credit union.

"If you use a national bank, you usually don't get to talk directly to the lender. But with a local lender, you're more likely to have a chance to tell your story," Godi says.

Here are a few other pointers for single homebuyers:

* Opt for a mortgage that keeps you within your financial comfort zone.

Many homeowners who faced foreclosure during the worst of the recession had used an adjustable-rate mortgage to finance their purchase. They were able to qualify for an introductory "teaser rate" on the home loan. But once the ARM adjusted upward, they were in over their heads.

Like all homebuyers, singles are now understandably resistant to taking an ARM, even though it could let them qualify for a larger mortgage than they could have obtained with a traditional fixed-rate loan. Still, some lenders are again beginning to promote ARMs.

As a single homebuyer, should you consider an ARM to increase your buying capacity? Merrill Ottwein, a former president of the National Association of Exclusive Buyer Agents, argues against that step.

"A fixed-rate mortgage gives you certainty your monthly principal and interest payments will remain constant for as long as you keep that loan. But with an ARM, you have interest-rate risk. And if rates rise, you get smacked," says Ottwein, a longtime real estate broker who works solely with homebuyers.

He also warns all buyers, and especially young singles, against taking any mortgage (fixed or adjustable) that feels uncomfortably large.

"People who are house-poor suffer a lot of fear and anxiety about making their payments, which is a terrible way to live," Ottwein says.

Even in an era of tight credit, many single buyers who make it through the mortgage pre-approval process are surprised to realize that they're qualified for a larger mortgage than anticipated. To avoid over-borrowing, Ottwein suggests you set your own upper limit rather than letting the lender do so.

"Decide on your ceiling before you go looking at houses or condos. If you need a reminder, write that number on an index card and carry it around with you," he says.

* Look for a home that a roommate could share.

Young singles used to sharing rental housing with roommates are often eager to live alone when they buy a home. Despite that, Ottwein recommends they consider buying a property they could share with a boarder, which would allow them that option in the future.

"Down the line, you might want an extra bedroom you could rent out to help offset your mortgage payments. In addition, if you choose to sell, a house or condo with two or three bedrooms is more marketable than one with just a single bedroom," Ottwein says.

What sort of floor plan works best to accommodate a roommate? He recommends you look for a place with a bedroom suite that includes a private bath. Also, a separate, outside entrance to the suite is ideal.

* Choose an energy-efficient place.

Some expenses tied to homeownership, such as taxes and insurance, can't be avoided. But home shoppers can more easily contain their utility bills if they choose a property that's well-insulated and has substantial, double- or triple-pane windows.

Before they commit to buying a particular home, Ottwein suggests that buyers ask their home inspector to evaluate the energy efficiency of the property they've chosen. He also recommends they ask the current owners for copies of their utility bills.

In addition, Ottwein advises buyers to update themselves on the topic of energy-efficient housing through online resources. One website that provides an array of information on the topic, www.energystar.gov, is sponsored by the U.S. Department of Energy, along with the U.S. Environmental Protection Agency.

* Make your friends a priority when you buy.

If you're like most single people, your personal life is of vital importance to you. But even though you may outpace your friends in achieving homeownership, you won't want to move to an area that makes it difficult to keep up your social life.

In an age of texting and email, it's not necessary to live around the corner from friends to stay in close touch. But, if possible, you'll want to avoid buying a property many miles from friends, even if that's your most affordable option, Ottwein says.

"You won't be happy if you're isolated from your friends. So don't buy a house so far away that you'll strain these important relationships," he says.